Deutsche Bank 'Claw' Claims Trader Bonus

By

Laura Stevens

Updated Jan. 25, 2013 7:54 p.m. ET

FRANKFURT— Deutsche Bank AGDB0.78% clawed back about €40 million (about $53.5 million) in bonuses from a former trader who the bank found was involved in attempting to rig interest rates, according to a person familiar with the matter.

Christian Bittar is under investigation by regulators as part of a group of traders who allegedly tried to rig interest rates, according to people familiar with the matter. The group was referred to in last year's settlement that Barclays PLC reached with U.S. and U.K. regulators over rate-rigging allegations, the people said, although the individual traders weren't named.

"Upon discovering that a limited number of employees acted inappropriately, we have sanctioned or dismissed employees, clawed back the unvested compensation of employees, and will continue to do so as we complete our investigation," said Michael Golden, a Deutsche Bank spokesman, in a statement.

Mr. Bittar couldn't be reached for comment Friday. He hasn't previously commented publicly on the allegations, and he hasn't been charged with any crime. Deutsche Bank dismissed Mr. Bittar in 2011. Bloomberg reported the clawed-back salary amount late Thursday.

Mr. Bittar was a proprietary trader at Deutsche Bank, Europe's largest by assets, trading in derivatives. Most senior traders of this type were paid a percentage of the profits they made, with deferred compensation usually comprising a mix of cash and stock paid out over three years. The bank closed its proprietary-trading division at the end of 2008.

U.S., U.K. and other banking regulators have been investigating allegations that more than a dozen banks, including Deutsche Bank, rigged the London interbank offered rate, or Libor, and other interest rates underpinning trillions of dollars in loans and other financial contracts. The probe already has produced settlements totaling nearly $2 billion with Barclays and UBS AG.

Deutsche Bank hasn't settled with regulators, but is expected to be one of the next to do so, according to people familiar with the matter.

The bank's internal probe into the matter has inspected thousands of trades between 2005 and 2011. So far, that probe has cleared senior executives of any involvement, according to the bank.

"Let me concur with the fact that Libor sickens us," Anshu Jain, Deutsche Bank's co-chief executive, said earlier this week. "Of the scandals we've had, it's the one that sickens me the most."

The Wall Street Journal reported earlier this month that Deutsche Bank made at least €500 million in profit in 2008 from trades linked to Libor and other global benchmark rates, according to internal bank documents.

Deutsche Bank calculated that as of Sept. 30, 2008, it could gain or lose as much as about €68 million for each one-hundredth of a percentage point change in the difference between interest rates linked to Libor and the euro interbank offered rate, or Euribor, the documents reviewed by the Journal show. Deutsche Bank made a €5.9 billion profit in 2008 at its global-finance and foreign-exchange unit, which handled most of the trades.

Deutsche Bank said the trades lowered the bank's risk and was based on market views, not "on any belief that the bank could inappropriately influence interbank lending rates."

Large banks routinely engage in such trading, and there is no indication that the moves in 2008 by Deutsche Bank, Europe's largest bank by assets, distorted the market or were illegal.

The scandal, however, relates to trades that sought additional gains by colluding with traders at other banks to manipulate the benchmark interest rates. Regulators haven't yet determined how much extra profit these tactics made for the banks, or how much they cost other lenders and borrowers.

"The trading strategy, which was subject to the bank's risk limits and used by many in the marketplace, was based on a legitimate market view that diversified and lowered the bank's portfolio risk during the peak of the financial crisis," Deutsche Bank's Mr. Golden said in the statement. "While our investigation is continuing, to date we have found no link between the inappropriate conduct of a limited number of employees and the profits generated by these trades."

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